The main objective of monetary policy in 2008 was to create conditions for sustainable economic growth and the implementation of the planned indicators of socio-economic development through the implementation of the goals and objectives of the monetary instruments of monetary and exchange rate policies.
In the difficult macroeconomic conditions, largely associated with the growing crises in global financial markets have had a negative impact on the Belarusian economy, the priority task of monetary policy, especially in the second half of the year was to implement a series of measures aimed at minimizing the effects of global financial and economic crisis for the financial and credit system of the Republic of Belarus, in order to ensure sustainability of the national currency and financial stability in general.
Coordinated action by Governments and the National Bank allowed to retain in the country in economic development, to ensure the planned level of the Belarusian ruble to the dollar, the stability of the banking sector, efficient and safe functioning of the payment system.
Exchange rate policy
The objective of monetary policy in 2008 - the protection and sustainability of the Belarusian ruble, including its purchasing power and rate in relation to foreign currencies. The most important role in achieving this goal belonged to the exchange rate policy.
Exchange rate policy in the reporting period was aimed primarily at ensuring the sustainability of the national currency and was conducted in the light of trends in world currency markets, balance of payments.
National Bank until August 2008 carried out a gradual strengthening of the Belarusian ruble against the U.S. dollar within the approved parameters of main lines, which stemmed from the need to respond to the depreciation of the dollar on the world market and increased inflation, as well as to prevent significant reduction in the rate Belarusian ruble to the currencies of countries - major trading partners.
In the second half of 2008 under the impact of financial crisis on world markets has increased mutual instability in foreign exchange rates. In particular, there was a significant strengthening of the dollar and the depreciation of currencies of major trading partners, which could lead to excessive growth of the Belarusian ruble to the currencies of these countries and, consequently, a significant deterioration in price terms of trade.
In this situation, to preserve the credibility of the exchange rate policy of the National Bank has provided a gradual depreciation of the Belarusian ruble to the level of the lower limit specified in the Guidelines for the Corridor 2 200 rubles per 1 U.S. dollar (Annex 2.1). In general, for the reporting year the official rate of Belarusian ruble to the U.S. dollar declined by 2.3 per cent, while the euro and Russia's ruble rose by 2.8 and 12.2 percent respectively.
Index of real exchange rate of Belarusian ruble to Russian ruble, as calculated by the consumer price index, was below the 2007 level of 1.9 per cent, the real effective exchange rate - at 0.6 percent.
Using the tools of monetary policy
Using the tools of monetary policy was subordinated to the achievement of certain goals for the year 2008 and is by means of the National Bank refinancing rate and interest rates on money market transactions (Annex 2.2).
The refinancing rate of the National Bank in accordance with the main directions of the end of 2008 was estimated at 7 - 9 per cent annual inflation at 6 - 8 percent.
In the first half of the year the refinancing rate unchanged and amounted to 10 per cent per annum. However, the acceleration of inflation in the second half to improve the profitability of savings in Belarusian rubles and to stimulate further growth in household deposits in banks and organizations of the National Bank will gradually increase it to 12 per cent per annum. Average for the year 2008 indicated the rate was 10.3 per cent per annum against 10.5 per cent per annum in 2007. In real terms, for the year under the higher compared with the year 2007 inflation rate refinancing formed on a negative level (minus 2.2 per cent per annum).
Impact of the National Bank on the dynamics of interest rates, money market and liquidity of the banking system was carried out by the operations of three types: always available, bilateral and open market operations.
Interest rates on continuously available operations to regulate liquidity (credit overnight swap operation overnight deposits from banks in the National Bank) to restrict fluctuations in interest rates on one-day MBC. Auction open market operations (lombard loan deal direct and reverse repurchase agreements, issuance of short-term bonds of National Bank, the deposits of banks with the National Bank), smoothed the fluctuations in yield MBC within the corridor, given fixed rate (Annex 2.3).
The situation in the money markets during the I - III quarter of 2008 was characterized by significant excess liquidity. During this period the National Bank were aimed mainly at removing the excess liquidity of banks by placing a temporary free funds of banks on auction basis (in their own short-term bonds issuance, deposit, and through purchases of government securities under reverse repurchase agreements) and in deposits of the National Bank at a fixed interest rate. The average daily balance of funds held by banks in the National Bank, during January - September 2008 amounted to 1.05 trillion. rubles.
The volume of refinancing of banks in January - September of the year was insignificant. The average daily balance of debt of banks on transactions liquidity support of the National Bank amounted to 23,5 billion rubles.
Given the prevailing conditions in financial markets, interest rates for continuously available operations support and withdrawal of liquidity of banks in January - August 2008 has not changed and amounted to 20 and 5 per cent per annum respectively. On September 17, 2008 interest rates on these transactions were reduced by 3 percentage points (to 17 per cent per annum).
However, in order to stabilize the currency market since mid-October 2008 was carried out smoothly rising interest rates on one-day MBC by increasing interest rates on operations to provide liquidity on the open market. The level of interest rates on lombard auction during October - December of the year was increased from 12 to 18 per cent per annum. In November 2008, 3 percentage points (from 17 to 20 per cent per annum - on overnight loans and the overnight swap from 5 to 8 per cent per annum, on overnight deposits) increased interest rates continuously available operations to regulate liquidity (Annex 2.4).
In the IV quarter of 2008, under the influence of adverse external factors on the money markets formed a significant lack of liquidity. In order to ensure a stable process payments National Bank of the Bank's substantial resource support. The weighted average debt balance for operations to support the ongoing liquidity of banks in October - December 2008 amounted to 1.4 trillion. rubles. In the absence of a number of banks required amount of highly liquid assets used as collateral for these operations, the National Bank began to implement additional refinancing in the form of loans secured by forfeit. The weighted average debt balance on such loans during the period of the year amounted to 481.7 billion rubles.
In 2008 the average daily balance of debt at the standard operations of maintaining current liquidity of the banking system amounted to 369.6 billion rubles, on the withdrawal of liquidity operations - 807.9 billion rubles. Share of auction operations seizure of liquidity in the total sterilizing operations was 72 percent, auction transactions liquidity support - 58.6 percent.
The regulation of money supply and the current liquidity of banks was carried out with the use of compulsory redundancy. Performance in reserve requirements on the basis of averaged allowing banks to minimize short-term fluctuations in liquidity, thereby producing a smoothing effect on the level of interest rates on MBC. Reserve requirements are a source of support for intraday liquidity.
To maintain the current liquidity of banks from December 1, 2008 reduced standard of reserve requirements for banks and non-banking financial institutions:
raised funds from individuals in Belarusian rubles - from 4,5 to 1,5 per cent;
from attracted funds of legal entities in Belarusian rubles - from 8 to 7 per cent;
of borrowed funds in foreign currency - from 8 to 7 percent.
In order to expand opportunities for banks to manage their liquidity from December 1, 2008 reduced the norm of a fixed reserve requirements from 70 to 60 percent.